ch5.doc

Chapter 5 Test Bank INTERCOMPANY PROFIT TRANSACTIONS – INVENTORIES

Multiple Choie !uestions

"O# #$

The The %ate %ateri rial al sal sale e o& in'e in'ent ntor or( ( ite% ite%s s )( a pare parent nt o% o%pa pan( n( to an an a&&iliate* o%pan( a$ ente enters rs the the ons onsol oli* i*at ate* e* re'e re'enu nue e o%p o%put utat atio ion n onl( onl( i& the the trans&er +as the result o& ar%,s len-th )ar-ainin-$ )$ a&&ets a&&ets onsoli*a onsoli*ate* te* net ino%e ino%e un*er un*er a perio*i perio*i in'entor( in'entor( s(ste% )ut not un*er a perpetual in'entor( s(ste%$ $ *oes not result in onsoli*ate* ino%e until the %erhan*ise is sol* to outsi*e parties$ *$ *oes not re.uire a +orkin- paper a*/ust%ent i& the %erhan*ise +as trans&erre* at ost$

"O# 0$

1one 1one(e (eat ater er Corp Corpor orat atio ion n o+ns o+ns a 234 234 inte intere rest st in Net Netar ar Co%p Co%pan an( ( a.uire* se'eral (ears a-o at a ost e.ual to )ook 'alue an* &air &air 'alue$ 'alue$ Netar Netar sells sells %erha %erhan*i n*ise se to 1one(e 1one(eate ater r &or the &irst ti%e in 0335$ In o%putin- ino%e &ro% the in'estee &or 0335 un*er the e.uit( %etho* 1one(eater uses +hih e.uation6 a$ 234 o& Netar, Netar,s s ino%e ino%e less less #334 o& the unreal unreali7e i7e* * pro&it pro&it in 1one(eater8s en*inin'entor($ )$ 234 o& Netar, Netar,s s ino%e ino%e plus plus #334 o& the unreal unreali7e i7e* * pro&it pro&it in 1one(eater8s en*inin'entor($ $ 234 o& Netar, Netar,s s ino%e ino%e less 234 234 o& the unreal unreali7e* i7e* pro&it pro&it in 1one(eater,s en*inin'entor($ *$ 234 o& Netar, Netar,s s ino%e ino%e plus 234 234 o& the unreal unreali7e* i7e* pro&it pro&it in 1one(eater,s en*inin'entor($

"O# 9$

In situ situat atio ions ns +her +here e there there are are routi routine ne in'e in'ent ntor or( ( sales sales )et+ )et+ee een n pare arent o%pa o%pan nies ies an* su) su)si* si*iar iaries ies +hen +hen prepa repar rininthe onsoli*ation state%ents +hih o& the &ollo+in- line ite%s is in*i&&erent to the sales )ein- either upstrea% or *o+nstrea%6 a$ )$ $ *$

Consoli*a Consoli*ate* te* retaine* retaine* earnin-s$ earnin-s$ Consol Consoli*a i*ate* te* -ross -ross pro& pro&it$ it$ Nonontro Nonontrollinllin- interest interest e:pense$ e:pense$ Consol Consoli*a i*ate* te* net net ino ino%e$ %e$ ;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=#

"O0 2$

The onsoli*ation proe*ures &or intero%pan( si%ilar &or upstrea% an* *o+nstrea% sales

sales

are

a$ i& the the %erhan* %erhan*ise ise is is trans&err trans&erre* e* at ost$ )$ un*er un*er a perio*i perio*i in'entor( in'entor( s(ste% s(ste% )ut not un*er un*er a perpetual perpetual in'entor( s(ste%$ $ i& the %erhan* %erhan*ise ise is i%%e*iate i%%e*iatel( l( sol* to outsi*e outsi*e parties$ parties$ *$ +hen the su)si*iar su)si*iar( ( is #334 o+ne*$ o+ne*$ >se the &ollo+inin&or%ation to ans+er .uestions 5 throu-h <$ Ea-le Corporation o+ns ?34 o& Fl(+a( In$,s o%%on stok that +as purhase* at its un*erl(in- )ook 'alue$ The t+o o%panies report the &ollo+inin&or%ation &or 0332 an* 0335$ @urin- 0332 one o%pan( sol* in'entor( to the other o%pan( &or 53333 +hih ost the trans&eror 23333$ As o& the en* o& 0332 934 o& the in'entor( +as unsol*$ In 0335 the re%aininin'entor( +as resol* outsi*e the onsoli*ate* entit($

0332 Selete* @ata Sales Re'enue Cost o& Doo*s Sol* Other E:penses Net Ino%e





@i'i*en*s Pai*

0335 Selete* @ata Sales Re'enue Cost o& Doo*s Sol* Other E:penses Net Ino%e

@i'i*en*s Pai* "O0 5$





Ea-le 33333 903333 #33333 #?33333





Fl(+a( 903333 #55333 ?<333 333

#<333

3

Ea-le 5?3333 933333 #93333 #53333

Fl(+a( 225333 #?3333 ##333 <2333

#333





5333

I& the the sal sale e re&e re&err rre* e* to to a)o' a)o'e e +as +as a *o+ *o+ns nstr trea ea% % sale sale  the the tota total l sales re'enue reporte* in the onsoli*ate* ino%e state%ent &or 0332 +oul* )e6 a$ )$ $ *$

?3 ?3333 333$ $ ??3 ??3333 333$ $ <03 <03333 333$ $ <3 <3333 333$ $ ;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=0

"O0 $

I& the sale re&erre* to a)o'e +as a *o+nstrea% sale )( +hat a%ount %ust In'entor( )e re*ue* to re&let the orret )alane as o& the en* o& 03326 a$ )$ $ *$

"O0 $

For 0332 onsoli*ate* net ino%e +ill )e +hat a%ount i& the intero%pan( sale +as *o+nstrea%6 a$ )$ $ *$

"O0 ?$

2533$ 2?33$ 2?233$ 53333$

I& the intero%pan( sale %entione* a)o'e +as an upstrea% sale +hat +ill )e the reporte* a%ount o& total sales re'enue &or 03356 a$ )$ $ *$

"O0 <$

 9333$ #3333$ #2333$ 03333$

#305333$ #<33333$ #<53333$ 0333333$

I& the intero%pan( sale +as an upstrea% sale the total a%ount o& onsoli*ate* ost o& -oo*s sol* &or 0335 +ill )e6 a$ )$ $ *$

933333$ 293333$ 23333$ 2333$

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=9

>se the &ollo+inin&or%ation to ans+er .uestions < an* #3$ @uk Corporation a.uire* a 34 interest in histle Corporation on Ganuar( # 0335 +hen histle,s )ook 'alues +ere e.ual to their &air 'alues$ @urin- 0335 @uk sol* %erhan*ise that ost 5333 to histle &or ##3333$ On @ee%)er 9# 0335 three= &ourths o& the %erhan*ise a.uire* &ro% @uk re%aine* in histle,s in'entor($ Separate ino%es Hin'est%ent ino%e not inlu*e* o& @uk an* histle are as &ollo+s @uk Sales Re'enue Cost o& Doo*s Sol* Operatin- E:penses Separate ino%es

"O9 #3$



#53333 <3333 #0333 2?333





033333 3333 #5333 ##5333

The onsoli*ate* ino%e state%ent &or @uk Corporation an* su)si*iar( &or the (ear en*e* @ee%)er 9# 0335 +ill sho+ onsoli*ate* ost o& sales o&6 a$ )$ $ *$

"O9 ##$



histle

 53333$  053$ #9953$ #3333$

@uk,s ino%e &ro% histle &or 0335 is6 a$ )$ $ *$

52053$ 5333$ 0#05$ ?3533$


"O9 #0$

Pon* Co$ a 554=o+ne* su)si*iar( o& Doose In$ %a*e &ollo+in- entr( to reor* a sale o& %erhan*ise to Doose Aounts Reei'a)le Sales Re'enue

the

3333 3333

All Pon* sales are at #054 o& ost$ One=thir* o& this %erhan*ise re%aine* in the Doose,s in'entor( at (ear=en*$ A +orkin- paper entr( to eli%inate unreali7e* pro&its &ro% onsoli*ate* in'entor( +oul* inlu*e a re*it to In'entor( in the a%ount o& a$ )$ $ *$

 2333$  5333$  ?333$ #3333$

>se the &ollo+inin&or%ation to ans+er .uestions #9 #2 an* #5$ ren Corporation a.uire* ?34 o+nership o& Ari* Inorporate* at a ti%e +hen ren,s in'est%ent Husin- the e.uit( %etho* an* Ari*,s )ook 'alues +ere e.ual$ @urin- 0335 ren sol* -oo*s to Ari* &or 033333 %akin- a -ross pro&it perenta-e o& 034$ 1al& o& these -oo*s re%aine* unsol* in Ari*,s in'entor( at the en* o& the (ear$ Ino%e state%ent in&or%ation &or ren an* Ari* &or 0335 +ere as &ollo+s

Sales Re'enue Cost o& Doo*s Sol* Operatin- E:penses Separate ino%es "O9 #9$

The 0335 sol* o& a$ )$ $ *$

onsoli*ate*





ino%e

ren #333333 533333 533333 053333

state%ent





sho+e*

Ari* 33333 233333 ?3333 #03333

ost

o& -oo*s

03333$ ??3333$ <33333$ <03333$


"O9 #2$

The 0335 onsoli*ate* ino%e state%ent sho+e* ino%e &ro% Ari* o& a$ )$ $ *$

"O9 #5$

5333$ 333$ ?3333$ <333$

The 0335 onsoli*ate* ino%e state%ent ino%e o& a$ )$ $ *$

sho+e* nonontrollin-

 0333$  ?333$ 03333$ 02333$

LO4

#$

On Ganuar( # 0332 @arter In*ustries a.uire* an ?34 interest in Ther%al Co%pan( to insure a stea*( suppl( o& Ther%al,s in'entor( that @arter uses in its o+n %anu&aturin- )usinesses$ Ther%al sol* #334 o& its output to @arter *urin- 0332 an* 0335 at a %arkup o& #034 o& Ther%al,s ost$ @arter ha* <33 o& these ite%s re%aininin its Ganuar( # 0335 in'entor( an* no ite%s on @ee%)er 9# 0335$ I& @arter ne-lete* to eli%inate unreali7e* pro&its &ro% all intero%pan( sales &ro% Ther%al onsoli*ate* net ino%e &or 0335 +as a$ )$ $ *$

o'erstate* )( 903$ un*erstate* )( 233$ o'erstate* )( 0233$ una&&ete* )eause @arter )u(s #334 o& Ther%al,s output$

>se the &ollo+inin&or%ation &or .uestions # an* #? Dre)e Co%pan( routinel( reei'es -oo*s &ro% its ?34=o+ne* su)si*iar( S+a%p Corporation$ In 0332 S+a%p sol* %erhan*ise that ost ?3333 to Dre)e &or #33333$ 1al& o& this %erhan*ise re%aine* in Dre)e,s @ee%)er 9# 0332 in'entor($ @urin- 0335 S+a%p sol* %erhan*ise that ost #3333 to Dre)e &or 033333$ 0533 o& the 0335 %erhan*ise in'entor( re%aine* in Dre)e,s @ee%)er 9# 0335 in'entor($ Selete* ino%e state%ent in&or%ation &or the t+o a&&iliates &or the (ear 0335 +as as &ollo+s Dre)e S+a%p Sales Re'enue 533333 233333 Cost o& Doo*s Sol* 233333 903333 Dross pro&it #33333  ?3333

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=

"O2 #$

Consoli*ate* ost o& -oo*s sol* &or Dre)e an* Su)si*iar( &or 0335 +ere a$ )$ $ *$

5#0333$ 50333$ 500533$ 50?333$

LO4

#?$

hat a%ount o& unreali7e* pro&it *i* Dre)e Co%pan( ha'e at the en* o& 03326 a$ )$ $ *$

"O5 #<$ 9$

#3333$ #0533$ 53333$ 0533$

A parent o%pan( re-ularl( sells %erhan*ise to its 34=o+ne* su)si*iar($ hih o& the &ollo+in- state%ents *esri)es the o%putation o& %inorit( interest ino%e6 a$ The su)si*iar(,s net ino%e ti%es 934$ )$ HThe su)si*iar(,s net ino%e : 934 J unreali7e* pro&its in the )e-inninin'entor( – unreali7e* pro&its in the en*inin'entor($ $ HThe su)si*iar(,s net ino%e J unreali7e* pro&its in the )e-inninin'entor( – unreali7e* pro&its in the en*inin'entor( : 934$ *$ HThe su)si*iar(,s net ino%e J unreali7e* pro&its in the en*inin'entor( – unreali7e* pro&its in the )e-inninin'entor( : 934$

LO5

03$

S.ui* Corporation a <34=o+ne* su)si*iar( o& Pen-uin Corporation sol* in'entor( ite%s to its parent at a 02333 pro&it in 0335$ Pen-uin resol* one=thir* o& this in'entor( to outsi*e entities$ S.ui* reporte* net ino%e o& #33333 &or 0335$ Minorit( interest ino%e that +ill appear in the onsoli*ate* ino%e state%ent &or 0335 is a$ )$ $ $

 ?233$  <033$ #3333$ #3?33$

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=

"O9 E:erise # Petrel Corporation a.uire* a 34 interest in Salt Corporation on Ganuar( # 0335 at a ost e.ual to )ook 'alue an* &air 'alue$ Salt reports net ino%e o& ??3333 &or 0335$ Petrel re-ularl( sells %erhan*ise to Salt at #034 o& Petrel,s ost$ The intero%pan( sales in&or%ation &or 0332 is as &ollo+s Intero%pan( sales at sellin- prie Value o& %erhan*ise re%aininunsol* )( Salt

 0333 #90333

Re.uire* #$ @eter%ine the unreali7e* pro&it in Salt,s in'entor( at @ee%)er 9# 0332$ 0$ Co%pute Petrel,s ino%e &ro% Salt &or 0335$ "O9K2 E:erise 0 Fri-ate)ir* Co$ )ou-ht 54 o& the outstan*in- 'otin- stok o& Cli&& Corporation at )ook 'alue se'eral (ears a-o$ Fri-ate)ir* sells %erhan*ise to Cli&& at #054 a)o'e Fri-ate)ir*,s ost$ Intero%pan( sales &ro% Fri-ate)ir* to Cli&& &or 0335 +ere 53333$ >nreali7e* pro&its in Cli&&,s @ee%)er 9# 0332 in'entor( an* @ee%)er 9# 0335 in'entor( +ere 0333 an* 9?333 respeti'el($ Cli&& reporte* net ino%e o& <33333 &or 0335$ Re.uire* #$ @eter%ine Fri-ate)ir*,s ino%e &ro% Cli&& &or 0335$ 0$ In Deneral Gournal &or%at prepare onsoli*ation +orkin- paper entries to eli%inate the e&&ets o& the intero%pan( in'entor( sales assu%in- the perpetual in'entor( %etho* is use*$

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=?

"O9K2 E:erise 9 Tern Corporation a.uire* an ?34 interest in 1ar)or Corporation se'eral (ears a-o +hen 1ar)or,s )ook 'alues an* &air 'alues +ere e.ual$ Separate o%pan( ino%e state%ents &or Tern an* 1ar)or &or the (ear en*e* @ee%)er 9# 0335 are su%%ari7e* as &ollo+s Tern Sales Re'enue Ino%e &ro% 1ar)or Cost o& Doo*s Sol* E:penses Net Ino%e

 H H 

1ar)or

#333333  ?3333 33333 H 033333 H 0?3333 

33333 933333  033333  #33333

@urin- 0332 Tern sol* %erhan*ise that ost #03333 to 1ar)or &or #?3333$ 1al& o& this %erhan*ise re%aine* in 1ar)or,s in'entor( at @ee%)er 9# 0332$ @urin- 0335 Tern sol* %erhan*ise that ost #53333 to 1ar)or &or 005333$ One=thir* o& this %erhan*ise re%aine* in 1ar)or,s @ee%)er 9# 0335 in'entor($ Re.uire* Prepare a onsoli*ate* Su)si*iar( &or 0335$

ino%e

state%ent

&or

Tern

Corporation

an*

"O9K2 E:erise 2 E-ret Corporation a.uire* an ?34 interest in Tik Corporation at )ook 'alue in 0332$ @urin- 0335 E-ret sol* #2?333 o& %erhan*ise to Tik at #34 o& E-ret,s ost$ Tik,s )e-inninan* en*inin'entories &or 0335 +ere 9?333 an* 22333 respeti'el($ Ino%e state%ent in&or%ation &or )oth o%panies &or 0335 is as &ollo+s E-ret Sales Re'enue Ino%e &ro% Tik Cost o& Doo*s Sol* E:penses Net Ino%e

Re.uire* Prepare a onsoli*ate* Su)si*iar( &or 0335$

 H H 

ino%e

Tik

993333  93233 #<3333 H 5333 H #35233 

state%ent

&or

#?3333 ##0333  93333  9?333

E-ret

Corporation

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=<

an*

"O2 E:erise 5 I)is Corporation a.uire* #334 o& "ake Co$ o%%on stok on Ganuar( # 0339 &or 553333 +hen the )ook 'alues o& "ake,s assets an* lia)ilities +ere e.ual to their &air 'alues an* "ake,s stokhol*ers, e.uit( onsiste* o& 0?3333 o& Capital Stok an* 03333 o& Retaine* Earnin-s$ I)is, separate ino%e He:lu*in- "ake +as <33333 ?53333 an* <53333 in 0339 0332 an* 0335 respeti'el($ I)is sol* in'entor( to "ake *urin- 0339 at a -ross pro&it o& 23333 an* 93 perent re%aine* at "ake at the en* o& the (ear$ The re%ainin- 93 perent +as sol* in 0332$ At the en* o& 0332 I)is has 05333 o& in'entor( reei'e* &ro% "ake &ro% a sale o& 033333 +hih ost "ake #3333$ There are no unreali7e* pro&its in the in'entor( o& I)is or "ake at the en* o& 0335$ I)is uses the e.uit( %etho* in its separate )ooks$ Selet &inanial in&or%ation &or "ake &ollo+s

Sales Cost o& Sales Dross Pro&it Operatin- E:penses Net Ino%e



0339 ?33333 203333 9?3333 933333 ?3333



0332 ?53333 223333 2#3333 903333 <3333



0335 <53333 533333 253333 9?3333 3333

Re.uire* Prepare a she*ule to *eter%ine I)is Corporation,s net ino%e &or 0339 0332 an* 0335$

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=#3

"O9K2 E:erise  Bittern Corporation a.uire* a 34 interest in Ree* Corporation at )ook 'alue se'eral (ears a-o$ Ree* purhases its entire in'entor( &ro% Bittern at #234 o& Bittern,s ost$ @urin- 0335 Bittern sol* #3333 o& %erhan*ise to Ree*$ Ree*,s )e-inninan* en*inin'entories &or 0335 +ere 2<333 an* 9933 respeti'el($ Ino%e state%ent in&or%ation &or )oth o%panies &or 0335 is as &ollo+s Bittern Sales Re'enue Ino%e &ro% Ree* Cost o& Doo*s Sol* E:penses Net Ino%e

 H H 

Ree*

233333  533 0#3333 H ?5333 H #?333 

003333 0333  23333  #3?333

Re.uire* Prepare a onsoli*ate* ino%e state%ent &or Bittern Corporation an* Su)si*iar( &or 0335$

"O 9K2 E:erise  E-ret Corporation pai* 02?33 &or an ?34 interest in Plu%e Corporation on Ganuar( # 0332 at +hih ti%e Plu%e,s stokhol*ers, e.uit( onsiste* o& #5333 o& Co%%on Stok an* 333 o& Retaine* Earnin-s$ The &air 'alues o& Plu%e Corporation,s assets an* lia)ilities +ere i*ential to reor*e* )ook 'alues +hen E-ret a.uire* its ?34 interest$ Plu%e Corporation reporte* net ino%e o& 2333 an* pai* *i'i*en*s o& 0333 *urin- 0332$ E-ret Corporation as &ollo+s

sol* in'entor( ite%s to Plu%e *urin- 0332 an* 0335

E-ret,s sales to Plu%e E-ret,s ost o& sales to Plu%e >nreali7e* pro&it at (ear=en*

The aounts pa(a)le in'entor( purhases$

o&

Plu%e

0332  5333 9333 #333

inlu*e

#533

0335  333 9533 #533

o+e*

to

E-ret

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=##

&or

The &ollo+in- on'ersion to e.uit( she*ule pro'i*es in&or%ation that %a( )e help&ul in o%pletin- the onsoli*ation +orkin- papers &or the (ear en*e* @ee%)er 9# 0335$

Retaine* Earnin-s

In'est%ent in Plu%e

Ino%e &ro% Plu%e

Prior (ears In'entor( pro&it

 H

#333 

H #333 

#333 

 #333 H #533  H #533 

Current (ear In'entor( pro&it=0332 In'entor( pro&it=0335 Totals

   H

 #333 H#533  H 533 

Re.uire* Finanial state%ents o& E-ret an* Plu%e appear in the &irst t+o olu%ns o& the partiall( o%plete* +orkin- papers$ Co%plete the onsoli*ation +orkin- papers &or E-ret Corporation an* Su)si*iar( &or the (ear en*e* @ee%)er 9# 0335$


E-ret Corporation an* Su)si*iar( Consoli*ation orkin- Papers &or the (ear en*e* @ee%)er 9# 0335 Eli%inations E-ret Plu%e @e)it Cre*it INCOME STATEMENT Sales Ino%e &ro% Plu%e



29333

03333

033

Cost o& Sales

H 00333 H

?333

Other e: enses Net ino%e

H #0033 H #333

9333 <333

Retaine* Earnin s #L# A** Net ino%e "ess @i'i*en*s Retaine* Earnin s #0L9# BA"ANCE S1EET Cash Aounts Reei'a)le=net @i'i*en* Reei'a)le In'entories Doo*+ill

#3333

?333

#333

<333

H #3333 H

5333

#333

#0333

5233

9333

#2333

#3333



Balane Sheet

0333 #?333

E.uip%ent an* 02333 Buil*in s=net In'est%ent in 0<33 Plu%e TOTA" ASSETS  <9333 "IAB$ K E!>ITY Aounts pa(a)le #533 @i'i*en* pa(a)le 333 Other *e)t #0533 Capital stok 23333 Retaine* Earnin-s #333 #L# Nonontrl$ Interest #0L9# Nonontrl$ Interest  "IAB$ K E!>ITY <9333

?333

9#333

50333 #0533 0533 #3333 #5333 #0333

50333


"O2 E:erise ? Car*inal Corporation a.uire* a <34 interest in Ro)in Corporation at )ook 'alue in 0332$ @urin0335 Car*inal sol* 003333 o& %erhan*ise to Ro)in at a -ross pro&it rate o& 934$ Ro)in,s )e-inninan* en*inin'entories &or 0335 +ere 93333 an* 23333 respeti'el($ Ino%e state%ent in&or%ation &or )oth o%panies &or 0335 is as &ollo+s Car*inal Sales Re'enue Ino%e &ro% Ro)in Cost o& Doo*s Sol* E:penses Net Ino%e

 H H 

Ro)in

?93333  9<33 593333 H #<333 H #5<33 

0<3333 #<333  50333  2#333

Re.uire* Prepare a onsoli*ate* ino%e state%ent &or Car*inal Corporation an* Su)si*iar( &or 0335$ "O5 E:erise < Plo'er Corporation a.uire* ?34 o& Arti In$ e.uit( on Ganuar( # 0339 +hen the )ook 'alues o& Arti,s assets an* lia)ilities +ere e.ual to their &air 'alues$ Plo'er separate ino%e He:lu*in- Arti +as #?33333 #33333 an* #<33333 in 0339 0332 an* 0335 respeti'el($ Plo'er sol* in'entor( to Arti *urin- 0339 at a -ross pro&it o& 2?333 an* one .uarter re%aine* at Arti at the en* o& the (ear$ The re%ainin- 05 perent +as sol* in 0332$ At the en* o& 0332 Plo'er has 05333 o& in'entor( reei'e* &ro% Arti &ro% a sale o& #33333 +hih ost Arti ?3333$ There are no unreali7e* pro&its in the in'entor( o& Plo'er or Arti at the en* o& 0335$ Plo'er a uses the e.uit( %etho* in its separate )ooks$ Selet &inanial in&or%ation &or Arti &ollo+s

Sales Cost o& Sales Dross Pro&it Operatin- E:penses Net Ino%e



0339 <3333 203333 93333 933333 3333



0332 ?23333 223333 233333 903333 ?3333




0335 <23333 533333 223333 953333 <3333

Re.uire* Prepare a she*ule to 0339 0332 an* 0335$

*eter%ine Plo'er Corporation,s net ino%e &or

"O5 E:erise #3 On Ganuar( # 0332 "ap+in- Corporation purhase* 34 o& the o%%on stok o& Fora-e Corporation &or 903333 +hen Fora-e ha* Co%%on Stok outstan*in- o& #33333 an* Retaine* Earnin-s o& 033333$ An( e:ess *i&&erential +as attri)ute* to -oo*+ill$ At the en* o& 0332 "ap+inan* Fora-e ha* unreali7e* in'entor( pro&its &ro% intero%pan( sales o& 333 an* ?333 respeti'el($ These (ear=en* pro&it a%ounts +ere reali7e* in 0335$ At the en* o& 0335 "ap+in- hel* in'entor( a.uire* &ro% Fora-e +ith a #3333 unreali7e* pro&it$ "ap+in- reporte* separate ino%e o& #33333 &or 0335 an* pai* *i'i*en*s o& 93333$ Fora-e reporte* separate ino%e o& 3333 &or 0335 an* pai* *i'i*en*s o& 03333$ Re.uire* Co%pute the a%ount o& onsoli*ate* net ino%e &or 0335$


SO">TIONS Multiple Choie !uestions #$



0$



9$

)

2$

*

5$

a

$

a

$

)

?$

a

<$

*

0332 o%)ine* sales "ess 0332 intero%pan( sales Consoli*ate* sales

<03333 H

Sellin- prie "ess Cost o& sales Ori-inal unreali7e* pro&it >nsol* perenta-e >nreali7e* pro&it

Co%)ine* 0335 sales "ess 0335 intero%pan( sales Consoli*ate* sales Co%)ine* ost o& sales "ess 0335 intero%pan( sales "ess >nreali7e* pro&it in the 0335 )e-inninin'en= tor( &ro% 0332 Plus >nreali7e* pro&it in 0335 en*inin'entor( Consoli*ate* ost o& sales

53333  ?3333 



53333 23333 #3333 934 9333



#305333



3 #305333 

2?3333 3

H



9333  3 2333

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=#

#3$

)

Co%)ine* ost o& sales "ess Intero%pan( sales re'enue Plus >nreali7e* pro&it taken out o& in'entor( H54:H95333  Consoli*ate* ost o& sales

##$

a

H##5333 : 34 = 0053

#0$

a

Sellin- prie "ess Cost o& sales >nreali7e* pro&it >nsol* &ration Cre*it to In'entor(

#9$

a

533333J233333= 033333J03333

#2$

)

#03333$?=033333$0$5

#5$

*

@o+nstrea% situation

#$

a

It +ill )e a%ount o& the share o& the %ar-in in the arrie* o'er #33 

#$

#?$





 H

 

#3333 ##3333



0053 053 52053

 H



3333 2?333  #0333 #L9 2333

o'erstate* )( the %inorit( interests, #33 o& pro&it <33 o& %aterials to 0335  H034 :

Dre)e plus S+a%p,s separate ost o& -oo*s sol*  233333 J 903333  "ess Intero%pan( sales  A*/ust Pro&it J#0533=#3333  Consoli*ate* CODS 



 H 

903

03333 033333  0533 500533 

) ;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=#

#<$

a

03$

a

Minorit( interest ino%e S.ui*,s reporte* ino%e "ess >nreali7e* pro&its in the en*inin'entor( S.ui*,s a*/uste* ino%e Minorit( interest perenta-e Minorit( interest ino%e

 H  

#33333 #333  ?2333 #34 ?233

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=#?

E:erise # Re.uire%ent # >nreali7e* pro&it in in'entor( #90333 – H#90333L#$0 



00333

Re.uire%ent 0 Ino%e &ro% Salt &or 0335 Share o& Salt,s ino%e H??3333 : 34 "ess >nreali7e* pro&it in en*inin'entor(

 H

Ino%e &ro% Salt



50?333 00333  53333

E:erise 0 Re.uire%ent # Ino%e &ro% Cli&& Share o& Cli&&,s reporte* net ino%e <33333 : 54  A** >nreali7e* pro&it in )e-inninin'entor( "ess >nreali7e* pro&it in en*inin'entor(

 H

Ino%e &ro% Cli&&



5333 0333 9?333  2333 

Re.uire%ent 0

Sales Re'enue Cost o& Doo*s Sol*

@e)it 53333

Cre*it 53333

To eli%inate intero%pan( sales an* purhases In'est%ent in Cli&& Cost o& Doo*s Sol*

0333 0333

To reo-ni7e pre'iousl( *e&erre* unreali7e* pro&its &ro% the )e-inninin'entor( Cost o& Doo*s Sol* In'entor(

9?333 9?333

To eli%inate intero%pan( pro&it in the en*inin'entor( &ro% ost o& -oo*s sol* an* in'entor( E:erise 9 ;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=#<

Tern Corporation an* Su)si*iar( Consoli*ate* Ino%e State%ent &or the (ear en*e* @ee%)er 9# 0335 Sales Ho%)ine* #33333 = 005333 intero%pan( Cost o& Doo*s Sol* Hsee )elo+ E:penses Minorit( Interest

 H H H

Consoli*ate* net ino%e



0?5333

 H

<33333 005333

H

93333

Consoli*ate* ost o& -oo*s sol* o%putation Co%)ine* ost o& sales H33333 J 933333 "ess Intero%pan( sales "ess >nreali7e* pro&it in )e-inninin'entor( H#?3333 = #03333 : #L0 A** >nreali7e* pro&it in en*inin'entor( H005333 = #53333 : #L9 Consoli*ate* Cost o& Doo*s Sol*

#95333 3333 233333 03333



05333 3333

Sales Ho%)ine* 993333 J #?3333 = #2?333 Cost o& Doo*s Sol* Hsee )elo+ E:penses Minorit( Interest

 H H H

90333 #5053 <5333 33




#39#53

 H

930333 #2?333

H

#2053

E:erise 2 E-ret Corporation an* Su)si*iar( Consoli*ate* Ino%e State%ent &or the (ear en*e* @ee%)er 9# 0335

Consoli*ate* ost o& -oo*s sol* o%putation Co%)ine* ost o& sales H#<3333 J ##0333 "ess Intero%pan( sales "ess >nreali7e* pro&it in )e-inninin'entor( H9?333 – H9?333L#$ A** >nreali7e* pro&it in en*inin'entor( H22333 – H22333L#$ Consoli*ate* Cost o& Doo*s Sol*



#533 #5053

E:erise 5 0339

0332

0335


E:erise  Preli%inar( o%putations >nreali7e* pro&it in )e-inninin'entor( e.uals 2<333 – H2<333L#$2 



#2333

>nreali7e* pro&it in en*inin'entor( 9933 – H9933L#$2 



<33

Consoli*ate* net ino%e Sales Ho%)ine* 03333 = #3333 intero%pan( Cost o& Doo*s Sol* Hsee )elo+ E:penses Minorit( Interest

 H H H

23333 ##33 #05333 90233




#?5333

 H H

0?0333 #3333 #2333 <33 ##33

Consoli*ate* ost o& -oo*s sol* o%putation Co%)ine* ost o& sales H0#3333 J 0333 "ess Intero%pan( sales "ess >nreali7e* pro&it in )e-inninin'entor( A** >nreali7e* pro&it in en*inin'entor( Consoli*ate* Cost o& Doo*s Sol*



E:erise  E-ret Corporation an* Su)si*iar( Consoli*ation orkin- Papers &or the (ear en*e* @ee%)er 9# 0335 Eli%inations E-ret Plu%e @e)it Cre*it INCOME STATEMENT Sales Ino%e &ro% Plu%e



29333 033

03333

Non= Cntrl$

) 333 a 533 e 33

;033< Pearson E*uation In$ pu)lishin- as Prentie 1all 5=0#

Balane Sheet 5333

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Retaine* Earnin-s #L# A** Net ino%e "ess @i'i*en*s Retaine* Earnin-s #0L9# BA"ANCE S1EET Cash Net Reei'a)les @i'i*en* Reei'a)le In'entories Doo*+ill Plant assets=net In'est%ent in Plu%e TOTA" ASSETS

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 H

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?333 ?333 34 5233 

5233 #5333


ch5.doc

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